Take the money and run..?

As promised last week, a little more on what successful entrepreneurs said to me about what they wished they’d known when they started up. The most interesting, financially, had to be …

5th September 2007 at 11:28 am

As promised last week, a little more on what successful entrepreneurs said to me about what they wished they’d known when they started up. The most interesting, financially, had to be the person – I won’t name them as the magazine that commissioned me naturally has first dibbs – who said that you should take as much money out of your business as you can legitimately, as soon as possible.

I find this interesting because it contrasts dramatically with just about everything any business school or advisor will tell you – when they’re on the record. Off the record it can be a very different thing indeed.

About ten years ago I tried to start a business, selling newsletters on saving money on technology to the small business community. It covered the stuff you didn’t see in computer magazines at the time – less on buying a new system and more on using the system you had, like using your PC as a fax (all terribly revolutionary ten years ago). The Internet more or less strangled it at birth but I’d followed all the rules like paying suppliers (good thing) and keeping money in the business where possible.

When the subscriptions dried up I still kept the money in there, hoping for some new input or sponsor, which never came (nowadays I’d just have asked the original sponsors for more money in the first place, which they’d have stumped up). So I had a couple of thousand, then it started to whittle away – because of bank charges for the privilege of keeping any finances in the account at all.

Did I do the right thing in keeping the money there? Certainly no businesses or suppliers (other than the bank) benefited from the company’s protracted end, it just didn’t have enough money to trade so the pittance that was left got swallowed up over time. Do I regret not winding the company up and having at least a few hundred to show for two years’ effort? Of course I do, but that’s hindsight – I know how it finished, I know there wasn’t any hope of resurrecting it. At the time it didn’t look that way.

So, do I agree that people should take whatever cash they can from their business on the principle that when things get worse other people will help themselves first? Ten years ago I would have said categorically not. Nowadays it seems a little less straightforward. I suppose what I really wish is that I’d spotted the early signs of death and recognised them for what they were rather sooner…

Guy Clapperton

Guy Clapperton is a freelance journalist who specialises in small business issues and has written for the likes of The Guardian, the FT and the Daily Mirror. Guy has written about finance and franchising for SmallBizPod. http://www.guyclapperton.co.uk

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  1. Bill Dueease says:

    I’m confused. Most business owners create their businesses to produce profits that they can take out of the business. If the businesses do not produce profits to compensate the owners, then they are working for nothing. So most owners have no hesitation to withdraw money from their businesses. AND if they have no profits, they normally have no business.

  2. Guy Clapperton Guy Clapperton says:

    Accepted completely, and indeed I ended up with no business. However, the point I was trying to make in the post was that people tend to get advised not to take money out too soon. Many businesses go through an investment phase before they see any profit. Amazon, for example, lost loads before it built critical mass and started making the massive profits. It was the taking money out ‘as soon as possible’ that I was querying.

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